To move steadily toward a balanced budget, we must also lighten government’s claim on our total economy.  We will not do this by raising taxes.  We must make sure that our economy grows faster than the growth in spending by the Federal Government.  In our fiscal year 1986 budget, overall government program spending will be frozen at the current level.  It must not be one dime higher than fiscal year 1985, and three points are key.

First, the social safety net for the elderly, the needy, the disabled, and unemployed will be left intact.  Growth of our major health care programs, Medicare and Medicaid, will be slowed, but protections for the elderly and needy will be preserved.

Second, we must not relax our efforts to restore military strength just as we near our goal of a fully equipped, trained, and ready professional corps.  National security is government’s first responsibility; so in past years defense spending took about half the Federal budget.  Today it takes less than a third.  We’ve already reduced our planned defense expenditures by nearly a hundred billion dollars over the past 4 years and reduced projected spending again this year.

You know, we only have a military-industrial complex until a time of danger, and then it becomes the arsenal of democracy.  Spending for defense is investing in things that are priceless—­peace and freedom.

Third, we must reduce or eliminate costly government subsidies.  For example, deregulation of the airline industry has led to cheaper airfares, but on Amtrak taxpayers pay about $35 per passenger every time an Amtrak train leaves the station, It’s time we ended this huge Federal subsidy.

Our farm program costs have quadrupled in recent years.  Yet I know from visiting farmers, many in great financial distress, that we need an orderly transition to a market-oriented farm economy.  We can help farmers best not by expanding Federal payments but by making fundamental reforms, keeping interest rates heading down, and knocking down foreign trade barriers to American farm exports.

We’re moving ahead with Grace commission reforms to eliminate waste and improve government’s management practices.  In the long run, we must protect the taxpayers from government.  And I ask again that you pass, as 32 States have now called for, an amendment mandating the Federal Government spend no more than it takes in.  And I ask for the authority, used responsibly by 43 Governors, to veto individual items in appropriation bills.  Senator Mattingly has introduced a bill permitting a 2-year trial run of the line-item veto.  I hope you’ll pass and send that legislation to my desk.

Nearly 50 years of government living beyond its means has brought us to a time of reckoning.  Ours is but a moment in history.  But one moment of courage, idealism, and bipartisan unity can change American history forever.

Sound monetary policy is key to long-running economic strength and stability.  We will continue to cooperate with the Federal Reserve Board, seeking a steady policy that ensures price stability without keeping interest rates artificially high or needlessly holding down growth.